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My book on the grain merchants has reverted to the title I first thought of, “Alphabet Soup—The Seven Companies at the Centre of Your Food Supply.” I am still aiming for publication in early-November.

There is a saying in the book business that “the wastepaper basket is a writer’s best friend.” In putting together the first draft of my book, I deleted large chunks of what I had previously written. I have fished out some of the least bad bits, and I will share them with you over the coming weeks. This is the first:

As Richard Manning wrote in “Against the Grain: How Agriculture has Hijacked Humanity,” of the roughly 300,000 years that mankind has wandered this earth, we have spent 290,000 of those as hunter-gatherers. Agriculture is a relatively new game for us and, as you have realised when visiting your local supermarket, we still have hunter-gatherer genes.

And even during the last 10,000 years, farming has changed little. Fields were regularly left fallow, and animal manure was the sole fertiliser. It was only in the early 1800s that scientists began to understand that inorganic minerals such as nitrogen, potassium, lime, and phosphoric acid could replenish depleted soils, leading to the production of mineral fertilizers.

The search for fertiliser led merchants and scientists to the dry seabird islands off the South American and South African coasts, where immense deposits of bird droppings, rich in nitrogen and phosphorus, had accumulated over centuries. Guano mining became a profitable business. Between 1840 and 1880, guano nitrogen made a vast difference to European agriculture, but the best deposits were soon exhausted. Rich mineral nitrate deposits were found in Chile, and nitrate mines gradually took the place of guano in the late 19th century.

However, as Michael Pollen writes in The Omnivore’s Dilemma, the great turning point in the modern history of agriculture can be dated to the day in 1947 when a huge munitions plant at Muscle Shoals, Alabama, switched over from making explosives to making chemical fertilizer. He explains that at the end of World War II, the US government found itself with a surplus of ammonium nitrate, the principal ingredient in making explosives. Ammonium nitrate is an excellent source of nitrogen for plants, and the chemical fertilizer industry (along with that of pesticides, which are based on the poison gases which were also developed for war) was the product of the government’s effort to convert its war machine to peacetime purposes.

Even though the earth’s atmosphere is about 80 percent nitrogen, nitrogen atoms have to be split and joined to hydrogen atoms (“fixed”) before they can be used for fertilizer or bombs. A German Jewish chemist named Fritz Haber worked out how to do that in 1909. Before he made that discovery, all the usable nitrogen on earth had to be fixed by soil bacteria or by electrical lightning, which breaks down nitrogen bonds in the atmosphere.

In his book, Enriching the Earth: Fritz Haber, Carl Bosch and the Transformation of World Food Production, Vaclav Smil explains that “there is no way to grow crops and human bodies without nitrogen.” Without Haber’s invention, the amount of life on earth would have been limited by the small amount of nitrogen that bacteria and lightning alone could release. Mr Smil argues that as a result, the Haber-Bosch process for fixing nitrogen (Bosch commercialised Haber’s idea) was the most important invention of the 20th century. He estimates that 40 percent of the people on the earth today would not be alive if not for the invention. Without synthetic fertilizer, billions of people would never have been born.

Although Fritz Haber won the Nobel Prize in 1918 for “improving the standards of agriculture and the well-being of mankind,” he has since largely been airbrushed out of history. During World War I he helped the German war effort by making bombs from synthetic nitrate. Worse, he also developed poison gases including Zyklon B, the gas used in the Nazi concentration camps.

Michael Pollen argues that once mankind had acquired the power to fix nitrogen, the basis of soil fertility shifted from a total reliance on the energy of the sun to a new reliance on fossil fuel. The Haber-Bosch process works by combining nitrogen and hydrogen gases under immense heat and pressure, the energy supplied by electricity. The hydrogen is supplied by oil, coal or, most commonly today, natural gas.

Growing crops, which from a biological perspective had always been a process of converting sunlight into food, has become a process of converting fossil fuels into food. More than half of the world’s supply of usable nitrogen is now man-made—and more than half of all the synthetic nitrogen made today is applied to corn alone.

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Wilmar International and Associated British Foods (ABF) announced the creation of a joint-venture in China that will produce yeast and other bakery ingredients. The partnership will build a new unit attached to a Wilmar food processing factory and take over operations from AB Mauri, an ABF subsidiary.

In order to reduce costs after a disappointing first quarter, ADM has merged two of its five businesses – the grain trading and oilseeds segments – into one operation. The group is struggling amid the bad weather in the US Midwest and trade tensions with China. This marks the second restructuring in 14 months and analysts noted that it would help streamline operations.

ADM was reportedly one of the trading groups who sold Brazilian corn to the US in recent weeks, as sources said that between 5 and 10 Brazilian corn vessels were purchased by Smithfield Food in the US, a subsidiary of China’s WH Group. Importing can save on the cost of transportation from the Corn Belt, where the bad weather is expected to delay planting and lower total corn output this year. Overall, traders estimate that the US could be due to receive 1 million mt of corn from South America. This would help Brazilian farmers, who expect to harvest a record 100 million mt of corn. Global corn supplies are also being threatened by the fall armyworm in China, usually the world’s second largest corn producer, as the pest has now affected 15 regions and should keep spreading, according to the USDA.

In Switzerland, the NGO Public Eye is asking the government to implement stricter rules on human rights violations for agricultural trading companies that operate out of the country. It estimates that 50% of global grain, 40% of global sugar and 30% of global coffee and cocoa are traded from Switzerland.

In a major but little-noticed move, the USDA officially authorised the transport of hemp and THC across US states last week. The agency said that “Congress has removed hemp from schedule I and removed it entirely from the CSA (Controlled Substances Act)”. Analysts noted that Unilever was in a good position to trial the sale of cannabidiol (CBD) products, which was legalised with hemp in the 2018 Farm Bill, thanks to its large number of brands. The group has already announced possible CBD variants for two brands: Schmidt’s Naturals, which makes natural deodorants, and Ben & Jerry’s.

The competition is increasing in the plant-based meat sector as Nestle is due to launch its Sweet Earth Awesome Burger in the US before the end of the year. While other brands like Beyond Meat and Impossible Foods are already available in many outlets, Nestle highlighted that its vegan burger is actually healthier, with more fibre and protein than its competitors. This marks the third plant-based burger offered by Nestle, along with the Garden Gourmet brand in the EU and the Incredible Burger it sells through McDonald’s in Germany.

The traditional meat market could also see some major changes, as Brazil’s chicken producer BRF SA is looking to acquire Marfrig Global Foods SA, which would create the world’s fourth-largest meat company. Protein export demand is expected to surge this year as China is due to lose 10% of its pig population to the African Swine Fever, although experts cautioned that the two groups might struggle to combine and streamline operations.

The Ecological Transition ministry in France instructed 15 fast-food chains, including McDonald’s, KFC, Burger King and Starbucks, to sort the waste at 70% of their restaurants before the end of 2019, in order to comply with a 2016 law. France is also planning to expand the ban on the destruction of food items to non-food items, like clothes sold by luxury stores or online retailers. The measures are seen as a consequence of the success of the green party during the European elections.

Lastly this week, a Californian judge agreed to overrule the decision that would have forced coffee makers to include a cancer warning label. The drawn-out legal case revolved around the trace amounts of acrylamide, a carcinogenic, found in coffee.

This summary was produced by ECRUU

Grain market shorts brace themselves for “history-making event”

Corn and soybean futures moved sharply higher during early trade on Tuesday as analysts warned that up to 13 million acres of area could be lost due to persistent rains across key planting areas.

By time of press the July front-month contracts on the Chicago Board of Trade were up 2.5% for corn and 1.5% for soybeans as traders rushed to buy back short positions.

“We have a true problem here, and the most aggressive price moves always occur when funds flip from net short to net long, that’s what’s happening,” said Charlie Sernatinger, a broker with ED&F Man.

Data recorded last week showed the net short position in corn has collapsed to 116,000 lots from 283,000 lots the week before, with soybeans falling to 153,000 lots from 169,000 lots over the same period.

Rain will continue to batter the Midwest this week, according to weather forecasts, although precipitation will be less intense than recent weeks.

Analysts expect some fieldwork to have been done despite the rains, although the estimates for Tuesday’s crop report vary wildly with corn plantings expected to be between 59-65% complete versus 49% a week ago and 90% by this time last year.

Soybeans are expected to be 25-36% complete versus 19% last week and 74% a year ago.

And now some analysts are saying the current crop could be the worst in more than 100 years, with more than 10% of the acreage lost due to sodden ground.

“Going forward there will be 10 million prevent plant corn acres and 3 million prevent plant soybeans. The yield is going down also. This a history making event in US crop production. Few understand the serious situation,” said Chuck Shelby, president of Risk Management Commodities.

Corn futures have rallied more than 18% in the past three weeks while soybeans have rallied just 5% over the same period.

However, with continued rain forecast, there is some concern that the corn rally could spill into soybean futures as delayed plantings expected to switch from corn to soybeans may not occur.

“The trade is focused on short covering in corn, which is lifting nearby contracts higher. Say the same planting problems arise for soybeans later this planting season, the same thing could happen to CBOT soybeans,” said Terry Reilly, an analyst at Futures International.

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OK, I had to do it. I couldn’t write a book* about commodity trading without (finally) reading The Secret Club that Runs the World—Inside the Fraternity of Commodities Traders by Kate Kelly, formally a journalist with the Wall Street Journal. The book was published in June 2014, so you may ask why it took me so long to get around to reading it. The answer is that the title put me off. It reeks of a conspiracy theory; it suggests that the commodity traders work together to secretly “run the world.”

But it wasn’t just the title that put me off; it was also the advertising blurb. The publishing company writes, “… if the individual participants in the great commodities boom of the 2000s went unnoticed, their impact did not. Over several years the size of the market exploded, and so did prices for raw materials—raising serious questions about whether the big traders were intentionally jacking up the cost of gasoline, food, and other essentials bought by ordinary people around the world. What was really driving all those price spikes?”

All sensational stuff! The advertising blurb adds that the author “takes us inside this secretive inner circle that controls so many things we all depend on”.

Imagine my surprise, therefore, when I finally read the book and found that it wasn’t the conspiracy-accusing, and industry-demolishing, book that the title suggested. In fact, it was more like a cross between Gala and Vanity Fair magazines.

I recommend that you read the book if you are, for example, interested to know that the fiancée of one hedge fund manager went to Paris three times to have her wedding dress fitted, but eventually chose a dress that was off the peg. Or that the same hedge fund manager decided not to drive his Bugatti in the South of France for fear that gravel from the driveway would chip the car’s paintwork.

It is a nice book, fun and easy to read, and as entertaining as celebrity gossip always is. But I am afraid you won’t learn much about commodity trading from it. Nor will you learn anything about the secret club of commodity traders that rules the world.

So why the misleading title and advertising blurb? Probably because the publishing house knows how to sell books—and they know that everyone likes a conspiracy theory. They know that people like to believe that secret clubs—or groups of powerful, often sinister, people—control our lives, and indeed really do rule the world.

The only problem is that they don’t, and it was therefore impossible for Kate Kelly to write a book that lived up to its title.

The political scientist Michael Barkun has argued that people like conspiracy theories for three reasons. He writes,

“First, conspiracy theories claim to explain what institutional analysis cannot. They appear to make sense out of a world that is otherwise confusing. Second, they do so in an appealingly simple way, by dividing the world sharply between the forces of light, and the forces of darkness. They trace all evil back to a single source, the conspirators and their agents. Third, conspiracy theories are often presented as special, secret knowledge unknown or unappreciated by others. For conspiracy theorists, the masses are a brainwashed herd, while the conspiracy theorists in the know can congratulate themselves on penetrating the plotters’ deceptions.”

There is certainly no shortage of conspiracy theories in our commodity markets. As Dan Morgan wrote in Merchants of Grain, it explains why trading “companies…stay in the shadows most of the time. Perhaps it was the ancient nightmare of the middleman-merchant that made them all so secretive—the old fear that in moments of scarcity or famine, the people would blame them for all their misfortunes, march upon their granaries, drag them into the town square and confiscate their stocks.”

Unfortunately, there can often be an anti-Semitic element in this, particularly as many traders and financiers are Jewish. Daniel Ammann touched on this issue in his book, The King of Oil. He wrote,

“For centuries Jews in Europe had suffered from discrimination. They were unable to become farmers, as they were forbidden from owning land. As they were excluded from the craft guilds, they were unable to become craftsmen. The Catholic Lateran Council of 1215 stated that Jews were not allowed to carry out the most important economic activities of the time. They were however permitted to perform one function that was proscribed for medieval Christians: making loans with interest. Thus the Jews became moneylenders and traders in the absence of other options.

“It is one of the ironies of history that the persecution and expulsion of the Jews is what made such an efficient trading community possible. King Edward I of England expelled the Jews in 1290, and the French monarchs Philip IV and Charles VI chased them from fourteenth-century France….Sephardic Jews were forced to leave Spain in 1492. By the onset of the modern era, the Jewish Diaspora was greater than that of any other people. The scattered Jews had a trading tradition that was second to none and sufficient confidence to enable trade over large distances and periods of time.”

But I will lead the last word to Yuval Noah Harari, author of Sapiens—A brief History of Mankind. He writes,

“As a historian, I’m sceptical about conspiracy theories because the world is far too complicated to be managed by a few billionaires drinking scotch behind some closed doors.”

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* I hope to publish Out of the Shadows: The New Merchants of Grain later this year